Just take the money! It’s free!
If I were a financial advisor (I’m not), that’s what I’d tell anyone who hasn’t considered shifting most of their short-term reserves away from bank deposits in favor of T-bills or a government money market fund.
It’s also what I’d tell someone who could avail themselves of unemployment benefits but hasn’t.
In a report released this week, the BLS said that in 2022, “about seven in 10” unemployed persons in the US who worked during the past 12 months (thereby making them eligible for benefits) hadn’t applied since their last job.
Normally, I wouldn’t mention a factoid like that, but it’s highly relevant right now for obvious reasons: Jobless claims in the US have remained historically subdued despite the brisket pace of layoffs since 2009. The latest figures, released Thursday, as usual, showed initial claims were below 200,000 for the 10th week in 11.
This has global implications: Absent evidence that the labor market is normalizing, the Fed will see little reason to relent in the inflation fight assuming outflows from regional banks stabilize, which I think they probably have.
The BLS figures suggest claims could (or maybe “should” is more apt) be higher. To reiterate: Just 26% of the unemployed applied for UI.
If you’re wondering what might motivate someone to forgo benefits to which they might be entitled, answers vary. More than half suspected they might not be eligible, which I suppose makes sense, but 10% of those who didn’t apply were worried about the stigma or, “because of attitudes about applying,” as the BLS put it.
That 10% also includes jobless Americans who said they didn’t need the money or didn’t “want the hassle” of applying to collect it. Some said they didn’t know how to apply, and others indicated they tried, but ultimately couldn’t figure it out.
Notably in the context of a labor market that remains very tight due to an acute dearth of workers, nearly one in five unemployed people said they didn’t apply for benefits because they expected to “start work soon.”
One way to think about this (and this is perhaps a lazy interpretation, but it’s worth a mention in case it comes back to haunt us) is to posit a kind of latent spike in jobless claims, just waiting to manifest if some combination of economic necessity and a sudden drop in job openings were to change the calculus for those who chose not to apply.
Relatedly, Bloomberg’s Simon White on Thursday noted that the share of US states showing a marked annual rise in claims is flirting with a threshold which, historically, presages a sudden surge.
In a separate post, White flagged rising WARN notices which have likewise tended to “precede sharp rises in unemployment claims, especially around recessions.”
There again, the suggestion is that a spike in jobless claims is in the pipeline, just waiting on an excuse to show up in the weekly series.
Or there is a whole cohort YOLO’ing in short-dated options instead for looking for a job. I could be wrong but it feels like this is a relatively new phenomenon that was fueled by Covid. This wouldn’t explain the lack of interest in UI though.
Is this new behaviour? That is, pre-COVID did 70% of eligible people not claim? If not new, then the current low number of claims should be taken at face value. If it is new, then there is a good reason to be concerned that a big jump will happen
My daughter and son-in-law have both been enjoying the fruits of hard work in technically related fields for over a decade. Both are now out of work because their firms were acquired by silly people. Both got severance, my daughter’s ends on June 1, her husband is good until Labor Day. Both of these folks were working at the Senior Director/VP level and will not sign up for unemployment for two reasons. First, as soon as they sign up they will have to start looking for work and they don’t want to do that yet. They have a very bright and very athletic son and they want to spend some time with him until school starts in the fall. Also, they want to find meaningful work that is satisfying and will add to their personal development. They could both get jobs next week. My daughter has already turned down two offers of 250k. As the Navy used to proclaim, “It’s not just a job, it’s an adventure.” That’s what my daughter, at least, is looking for. So they are both going to go without the extra $400/month. They can still afford their lives and I pitched in to cover their COBRA. Funny old world …
One other factor may affect the new trend. If the bureaucrats running UI make one go out on junk interviews to keep their benefits, repeatedly turning down the stupid jobs you are offered may soon reduce access if it gets around that you are not serious and that’s bad.
To collect unemployment, you only need to check the box that states you’re looking for work (vs. somehow demonstrating that you’re actually looking for work).
So your daughter has turned down two $250k-job offers, and you’re pitching in to cover their COBRA (while they’re collecting severance). That seems… inflationary.